Oracle May Be Having Its Nvidia Moment. Or It Could Be a Repeat of 1999.

Oracle shares are on pace for their best day sine 1999. That parallel can raise questions. Photo: Dreamstime

Oracle may have just had its “Nvidia moment.”

The world’s biggest chip maker, now a $4.2 trillion tech titan, was an up-and-coming player in artificial intelligence in the spring of 2023 when it shocked Wall Street with a massive revenue forecast tied to demand for its AI-powering processors. The stock added $200 billion in value in a single day and hasn’t looked back.

Oracle shares are on pace to add more than $200 billion in value today, having shocked Wall Street with a massive revenue forecast tied, this time, to demand for its cloud-computing infrastructure.

Like Nvidia, which made its bones as a maker of sophisticated videogame chips, Oracle has long been seen as a high-end software company. That’s not the case anymore.

The group unveiled a mixed set of fiscal first-quarter earnings last night, which were light on profit but impressive on revenue gains. But shining through was its backlog of cloud bookings—dubbed “remaining performance obligations,” or RPO—which surged more than 350% from last year to $455 billion.

“It looked like a misprint, but in a good way,” said Ben Reitzes, head of technology research at Melius. “We’ll be talking about this one for a long time.”

That’s not stopping some investors from wondering whether Wednesday’s move is more a harbinger of a tech bubble than an echo of Nvidia’s game-changing update in 2023. Today’s gain of around 36% is the biggest single-day advance for Oracle shares since 1992.

It outstrips a single-day surge of 31% made in 1999, when Oracle shares went from $9 to $40 and back to $9 in the space of three years during the boom and bust of the dot-com era.

Eye-catching revenue forecasts, based on a spending wave tied to internet and e-commerce expansion, powered the gains. When that dried up, the stock tanked.

But things are different today.

Agentic AI spending is forecast to rise to around $1.3 trillion over the next four years, according to the International Data Corporation. The biggest hyperscalers have already committed around a $400 billion this year alone. And all of that is going to require cloud-computing space to house it.

Oracle, Microsoft , Amazon, and Google parent Alphabet are the only companies able to provide that space with scale and flexibility.

“Oracle is another data point showing us the AI infrastructure story remains intact and visibility for spending remains strong,” said Tom Lee, head of research at Fundstrat.

Oracle’s own five-year forecast for cloud infrastructure revenue assumes a compound annual growth rate of 70%. That would take its 2030 tally to $144 billion.

Lofty projections, for sure, but CEO Safra Catz told investors last night that much of that figure is already baked into its RPO tally of $455 billion.

“I expect we will sign additional multibillion-dollar customers and that RPO will likely grow to exceed half a trillion dollars,” she wrote.

Expanding its cloud-infrastructure capacity comes with a cost, of course, and Oracle said capital spending is likely to rise 65% from its last fiscal year to around $35 billion.

That’s going to eat into a lot of its cash flow, but Evercore ISI analyst Kirk Materne said long-term investors “will accept this trade-off to secure a leadership position in next-gen AI infrastructure, while also capturing accelerating revenue and earnings.”

There is a lot of runway ahead, as well. Oracle is tied to the U.S. government-backed AI venture Stargate, which aims to invest $500 billion over the longer term. And two of Oracle’s biggest customers, xAI and Facebook parent Meta Platforms, are planning to spend billions more in building out their own suite of AI-powered technologies.

“Oracle’s results give us a peek into a future that we haven’t seen in over 25 years covering the software sector,” said Guggenheim analyst John DiFucci.

Citing the expected evolution of AI from training to inferencing, as well as the likely demand from sovereign users of cloud infrastructure and its traditional cloud business, DiFucci sees Oracle’s current growth prospects as sustainable.

“This is a race with no finish line,” he said.

Write to Martin Baccardax at martin.baccardax@barrons.com